Court File and Parties

COURT FILE NO.: 40411/17 DATE: 2020-08-18 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Samantha Anne Dowdall, Applicant AND: Paul David Dowdall, Respondent

BEFORE: Kurz J.

COUNSEL: Michael Ruhl and Ashley Timm, for the Applicant Gabrielle Pop-Lazic, for the Defendant

HEARD: August 12, 2020 - by teleconference

Endorsement

Introduction

[1] The Supreme Court of Canada has described non-disclosure as the cancer of family law (Leskun v. Leskun, 2006 SCC 25 at para. 34, quoting Cunha v. Cunha, (1994), 99 B.C.L.R. (2d) 93 (S.C.) at para. 9). While the court was speaking of non-disclosure of property, the same principle applies to non-disclosure of income in family law litigation. The key issue in this case is whether the Respondent husband’s failure to advise the Applicant wife that he was taking a new, far better paying job, before accepting her offer to finally settle her spousal support claims, should invalidate their agreement.

[2] The Respondent husband ("Paul") moves for judgment based on his acceptance of the written offer to settle of the Applicant wife (“Samantha”). On October 9, 2019, on the eve of trial, Samantha had offered to settle all spousal support issues through eight years, one month of fixed, limited term payments. The anticipated trial never took place and the matter did not resolve. Over seven months later, Paul made his own offer on May 12, 2020. When, three days later, Samantha had not accepted his offer, Paul had his lawyer accept Samantha’s October 6, 2019 offer.

[3] In resisting his motion to enforce their settlement, Samantha says that Paul failed to disclose that he was in the process of accepting an offer of new, far better paying job at the time that he accepted her offer. She argues that the non-disclosure of the offer of employment, on the table at the time of his acceptance, was material and leads to an unfair result. She argues that the court should exercise its discretion to refuse to enforce the agreement.

Background

[4] The parties began to cohabit in 2005 or 2007 (they do not agree on the year). They married on October 24, 2009 and separated on April 23, 2017. Depending on which party is to be believed, their total cohabitation was for 12 or 14 years. They have two children, now almost 11 ½ years and almost 10 years old. Paul is a business executive with a background in finance. The children are in the primary care of Samantha, who appears to have been a stay-at-home mother for the children. She returned to school to obtain and has now completed a teaching degree. The parties agree that she has a compensatory support claim.

[5] This litigation began in 2017. By 2019, the parties had settled most issues. The key remaining issues related to spousal support quantum and duration as well as the quantum of child support. An obvious key issue in regard to both child and spousal support was the income of the parties for support purposes.

[6] The matter was scheduled for the October 2019 Milton trial blitz. At that time, the matter was called for trial before Chozik J. While hearing the opening statement of Samantha’s counsel, Chozik J. realized that she may have conducted a conference in this matter. After reviewing the record, she realized that she had been correct and recused herself, effectively declaring a mistrial. The matter came before Coats J., the Local Administrative Justice in Milton. Coats J.’s endorsement stated that the matter had not been reached. She placed it on the spring 2020 blitz list, to be called sometime in or about March 23, 2020. Because of the COVID-19 pandemic, the courts were suspended, and the matter was not called.

[7] In the period leading up to the anticipated October 2019 trial, the parties engaged in negotiations. On October 6, 2019, Samantha made a written offer to settle under r. 18 of the Family Law Rules (“FLR”), to resolve the spousal support issue on a final basis. The terms of the offer may be summarized as follows:

1. Spousal support will be paid by Paul to Samantha in the amount of $3,800 per month. That amount represents mid-level support for a payor earning $200,000 per year and a recipient earning almost nothing.
2. The payments will be made between November 1, 2019 and December 31, 2027. Thereafter, payments will be terminated.
3. The spousal support payments will be fixed and non-variable except with regard to Paul’s inability to work on the basis of: i. Catastrophic injury; ii. Illness; iii. Involuntary termination of employment, provided that he has made reasonable efforts to find comparable employment and has been unable to do so.
4. The offer is open for acceptance without costs at any time before one minute following the commencement of the trial. Thereafter the offer will be open for acceptance, but Paul will pay Samantha’s partial indemnity costs for the issue of spousal support from the time of the commencement of this proceeding.

[8] With the mistrial and then the advent of the pandemic, negotiations went into limbo. Early in the pandemic, Paul had advised Samantha that he had been forced to take a temporary 25% decrease in his $200,000 per year salary as the CFO of Diamond Estates Wines & Spirits (“Diamond”).

[9] The next step in the parties’ negotiations was a text string between Paul and Samantha on May 12, 2020, where Paul invited her to reopen negotiations on spousal support. Samantha responded tentatively, claiming that Paul had failed to take her position into account in their previous negotiations. Nonetheless, she signalled her willingness to negotiate and hope for settlement.

[10] Paul wrote an email to Samantha at 7:00 p.m. that evening, making a settlement proposal. His offer was similar in some respects to Samantha’s previous formal offer, but it contained some terms which his lawyer contends to have been more generous to Samantha than her own offer. That contention is only partially correct. He offered (with my comments):

1. Monthly spousal support of $3,800 per month (the same figure that Samantha had offered);
2. Term to end April 2028 (rather than December 31, 2027 in Samantha’s offer).
3. Support fixed and non-variable unless Paul is out of work for six months. There is no reference to illness or unintentional unemployment. The two terms dealing with the end of the fixed term are different enough that it cannot be said that one is preferable to Samantha than the other.
4. Any claims to retroactive spousal or child support are waived in return for Paul waiving a claim to occupation rent. Samantha’s offer says nothing about retroactive spousal or child support. In light of that difference and the fact that occupation rent against a spouse residing in a matrimonial home is rarely granted (see: Foffano v. Foffano, [1996] O.J. No. 3284 (S.C.J.), Higgins v. Higgins, [2001] O.J. No. 3011 (S.C.), at para. 39) I cannot say that this term of Paul’s offer is more generous that the terms of Samantha’s offer.
5. He will supply unspecified life insurance to cover the support payments, a term not included in Samantha’s offer.

[11] In the body of his email, Paul advocates the benefits of his offer. He represents to Samantha that his proposal places the financial risk on him while it gives Samantha and their children financial certainty. At the close of his email, Paul added that since they had last spoken the previous week, he was told by Diamond that the term of his 25% income reduction would be extended beyond its initial eight-week term. He added, gloomily:

I am not happy about this but like before, we were asked as a group to participate and me being the only holdout (all others agreed, I waited till the end) does not leave me much of a future.

[12] What Paul did not tell Samantha was that as he was writing to her about an indefinite extension of his 25% pay cut, he had a lead on a very promising new job. That was a job as CFO and ultimately, Country Manager of Ignite International Brands (“Ignite”). Some of the relevant details of Paul’s dealings with Ignite include:

• April 27, 2020 Paul speaks to Lily Popa of Ignite’s job search agency. She follows up with an email revealing the name of her client and provides a job description.
• April 29, 2020 Paul has a one-hour interview with Linda Menzel, legal counsel and interim HR employee for Ignite. Paul was asked to sign a non-disclosure agreement regarding the confidential information that would be relayed to him during any negotiations. He returns it, signed, the next day.
• May 5, 2020 Paul has a two-hour interview with the head of sales, the VP marketing, and the COO of Ignite.
• May 8, 2020 Paul has separate one-hour interviews with the president and an advisor to Ignite.
• May 10, 2020 Paul has separate one-hour interviews with the incumbent CFO and VP Finance of Ignite.
• May 11, 2020 Paul has an initial compensation consultation with president of Ignite. He was told that position was budgeted for a base salary of $225,000 per annum, three weeks holidays, 250,000 stock options, no car allowance and a $5,000 per year extended health allowance. Paul claims that he did not believe that he could take the job as the non-salary benefits were inferior to his present ones. Of course, even this initial offer included salary that was $75,000 per year greater than his reduced salary at Diamond. But he also candidly admitted that he continued the discussions because of the precariousness of his position with Diamond and the lack of effort required to continue the discussions with Ignite. He also admitted that he had no long-term plans to stay at Diamond.
• May 12, 2020 Paul had two telephone calls with an obviously interested president of Ignite. During the first call, at 3:00 p.m. Paul proposed an annual salary of $250,000 per year, 1,000,000 stock options (as he had with Diamond), five weeks’ holiday (as he had with Diamond), and a full benefits package, as opposed to a spending allowance. That phone call took place about four hours before Paul made his emailed offer of May 12, 2020 to Samantha.
• May 12, 2020 At 8:00 p.m. that evening, Paul spoke again to Ignite’s president. The president had spoken to the Ignite board of directors and was optimistic that they would approve terms acceptable to Paul. They agreed that Ignite would issue a generic news release that it had hired a new CFO, without naming Paul. The release referred to someone with Paul’s exact qualifications. Despite agreeing to the public release of this information, Paul now claims that he was pessimistic that he would be able to reach an employment agreement with Ignite. He states, without providing evidence, that the premature news release of the hiring of a CFO later contributed to the termination of the president’s employment.
• May 13, 2020 Ignite’s news release about the hiring of an unnamed CFO, citing Paul’s exact qualifications, went out. That same day, Ignite made a formal employment offer to Paul. The job offer included most of Paul’s terms. The job would start June 8, 2020. Paul was actually offered an increased salary of $280,000 annually. The increase was offered in place of increased stock options and four rather than five weeks of vacation. The Ignite offer also included a discretionary bonus of 30%. Paul spoke to Ignite’s president and indicated that he needed time to consider the offer.
• May 14, 2020 At their request, Paul spoke to the Ignite president and HR person. They wanted to know his response to the job offer. They also raised an addition to his job description. He would not only be CFO but also “Country Manager”. Paul stated that the increased job responsibilities were “enticing” to him. Ignite also offered to double his health account to $10,000.
• May 15, 2020 On May 15, 2020, Paul informed Diamond that he was resigning to accept another job offer. Later that day he delivered a formal letter of resignation to Diamond, effective Friday, June 5, 2020. His start date at Ignite was to be the following Monday, June 8, 2020. Paul would not sign his formal employment contract for three more days. As set out above, Paul had his lawyer write to Samantha’s lawyer that same day to accept her October 6, 2020 offer. He had yet to inform her of any of the events set out above.
• May 16, 2020 Paul spoke with someone from Ignite whose identity he could not recall. They spoke about some of the details of his new job. He was asked about signing the job offer. He claims that he stated that he needed a day or two further to consider the offer, as he was still working full time for Diamond. He does not appear to have told Ignite that he had delivered a resignation letter to Diamond (nor was he required to do so). He was told to sign the job offer by Friday, May 17, 2020 for the Monday markets.
• May 18, 2020 Paul signed and returned Ignite’s job offer a day after the date requested by Ignite.
• June 5, 2020 Paul’s last day with Diamond.
• June 8, 2020 Paul’s first day with Ignite.

[13] The parties and their lawyers continued to negotiate the remaining issues between them, including both spousal and child support, and the costs term of the offer. Samantha was seeking her costs, arguing that her offer had been accepted after the trial had commenced. Paul took the position that the mistrial meant that the trial never commenced.

[14] These further negotiations proceeded without Paul informing Samantha of his resignation from Diamond, his new job with Ignite and his substantial salary increase.

[15] On June 1, 2020 they exchanged texts in which Paul pushed Samantha to settle all issues between them. One of Paul’s texts referenced his offer of an increased two months of spousal support. He was clearly attempting to negotiate further and finalize the spousal support issue, even though his lawyer had accepted Samantha’s offer.

[16] Samantha’s response that day was that the two sets of lawyers were working on finalizing a proposal for the next week. Paul was not satisfied. His responding text expressed his impatience with the delay in finally concluding their agreement on whatever additional terms that had been discussed (which have not all been placed before the court). Paul started his text to Samantha by saying “Not being grumpy…” and then proceeded to express his displeasure with Samantha for not settling amicably when he had even offered two more months of support. He ended by telling her that he was leaving her to “manage” her lawyer and that he would instruct his lawyer to go in another direction with regard to the accepted offer.

[17] After the text exchange of June 1, 2020 with Paul, Samantha wondered why he was so impatient to finalize their settlement. The mistrial had occurred seven months earlier and, depending on the pandemic’s effect on the courts, a trial would not be heard for many more months. She discussed the issue with her parents. Her father then Googled Paul’s name and learned, from an on-line press release, of Paul’s changed employment status. That press release from Ignite was dated June 1, 2020, the date of that impatient text exchange.

[18] Samantha’s counsel moved expeditiously to obtain the details of the new job and the chronology of his job change. He first wrote to Paul’s lawyer in that regard on the evening of June 1, 2020.

[19] Three days later, Ms. Pop-Lazic wrote back to say that Paul would start paying child support based on his increased salary, starting June 15, 2020. That was the first time that he acknowledged either his income increase or obligation to pay increased support.

[20] Having finally admitted to his job change and income increase, Paul’s lawyer asked whether they could finalize the spousal support issue based on the accepted offer. Not leaving the issue open for discussion, Paul’s counsel stated that she would be seeking a motion date.

Issues:

[21] This motion raises two key issues:

1. Should the court enforce the terms of the agreement of the parties regarding spousal support? and
2. If the court chooses to enforce that agreement, is Samantha entitled to costs of the proceeding up to the time of settlement?

Summary of my Decision

[22] For the reasons that follow, I find that Paul’s failure to advise Samantha, before accepting her offer, that he had resigned from Diamond (or was about to do so) and was planning to take a job with Ignite that would give him a substantial wage increase represents material non-disclosure. Accordingly, I find that he did not deal with Samantha in good faith. The terms of the offer that he had accepted were based on outdated information and would likely have resulted in an unfair result for her. Accordingly, I exercise my discretion to refuse to enforce the terms of Samantha’s offer of October 6, 2019, as accepted by Paul on May 15, 2020.

Issue No. 1: The court should refuse to enforce the terms of the agreement of the parties regarding spousal support

Applicable Law

[23] Under r. 18(13) a party may move to enforce an accepted offer. There is no question that Samantha’s October 6, 2019 offer fits within the ambit of r. 18.

A Party’s Disclosure Obligations in Family law

[24] Our courts have increasingly recognized the centrality of disclosure in family law and its converse, the ills that non-disclosure create. This point was recently emphasised by the Ontario Court of Appeal in Leitch v. Novac, 2020 ONCA 257, where Hourigan J.A., writing for the court stated at para. 44:

As the Supreme Court suggested in Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920, at para. 34, nondisclosure is the cancer of family law. This is an apt metaphor. Nondisclosure metastasizes and impacts all participants in the family law process. Lawyers for recipients cannot adequately advise their clients, while lawyers for payors become unwitting participants in a fraud on the court. Judges cannot correctly guide the parties to a fair resolution at family law conferences and cannot make a proper decision at trial. Payees are forced to accept an arbitrary amount of support unilaterally determined by the payor. Children must make do with less. All this to avoid legal obligations, which have been calculated to be a fair quantification of the payor's required financial contribution. In sum, nondisclosure is antithetical to the policy animating the family law regime and to the processes that have been carefully designed to achieve those policy goals.

[25] In C.M.M. v. D.G.C., 2015 ONSC 1815, Horkins J. summarized a number of authorities to assert that disclosure is a “fundamental tenet” of family law. She added at para. 221 that “[t]here is an obligation to provide complete, detailed and timely disclosure.”

[26] Rule 13 of the Family Law Rules (“FLR”) codifies many of the broad disclosure obligations in family law proceedings. FLR r. 13(1) requires parties to file sworn financial statements (Form 13 or 13.1) where there is a claim to support or property in a family law proceeding such as this. Subrule 13(3.1) sets out the documents that must be served with a sworn financial statement, including the items set out in s. 21 of the Child Support Guidelines (e.g. last three notices of assessment and reassessment, most recent statement of earnings or a letter from employer setting out that information).

[27] Subrule 13(11) deals with the circumstances where a party believes that the other party has failed to provide sufficient financial disclosure to allow for a full understanding of the other party’s financial circumstances. The provision broadly encompasses deficient disclosure, whether in a sworn financial statement “or otherwise”. The party deprived of the disclosure may ask for it. If the disclosure is not provided within seven days, the party may move for an order that the information be provided or that a new financial statement be sworn.

[28] Parties are required to update any information that is more than 30 days old in their financial statements for conferences and trial (r. 13(12)). However, under r. 13(15):

As soon as a party discovers that a document that he or she has served under this rule is incorrect, incomplete or out of date, the party shall serve on the other party and, if applicable, file, a corrected, updated or new document, as the circumstances require.

[Emphasis added]

[29] A similar duty applies to omissions, rather than updating of relevant documentary disclosure (r. 13(16)). The court may order the production of any missing document required by r. 13, an Act or regulation, (r. 13(17)).

[30] Subrule 13 does not act as a limit on any other disclosure duty set out in any other Act or regulation (r. 13(18)).

[31] The settlement between the parties here is not a domestic contract under the Family Law Act (“FLA”) because it lacks the formalities set out in s. 55. It also deals exclusively with support rather than property. Nonetheless, the FLA provisions for setting aside a domestic contract offer a useful analogue to the setting aside of a settlement agreement for non-disclosure. Under FLA s. 56(4), a court may set aside a domestic agreement or a provision in it if a party failed to disclose significant assets, debts or other liabilities existing when the domestic agreement was made; if a party did not understand the nature or consequences of the domestic contract; or otherwise in accordance with the law of contract.

[32] While this provision says nothing about non-disclosure of income, as opposed to assets and debts, it has been relied upon to set aside support terms of a domestic agreement (see for example, Virc v. Blair, 2014 ONCA 392 at para. 56).

[33] In LeVan v. Levan, 2008 ONCA 388, the Ontario Court of Appeal found that s. 56(4)(a) requires the following two-stage analysis:

(i) Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged? (ii) If so, is it appropriate for the court to exercise its discretion to set aside the agreement?

[34] Borins J.A., writing for the court in LeVan, explained the purpose of s. 56(4) as a form of “judicial oversight” of domestic agreements. He also noted that under s. 56(7), the s. 56(4) oversight could not be waived by the parties.

[35] In Leopold v. Leopold, [2000] O.J. No. 4604, Wilson J, of this court, after an exhaustive review of the authorities to date, found that separated spouses do not owe a fiduciary duty to each other when negotiating a resolution of their affairs. Instead, the contractual duty of good faith applies. As she explains at para. 102, under that duty,

Parties cannot "play their cards close to the vest", selectively choosing disclosure, and survive scrutiny using the principles of good faith. Contracting parties must advise of any material facts or circumstances that are relevant to a settlement and are obliged not to take advantage of any known frailty. These positive obligations or standards of behaviour are recognized in the provincial Family Law Act at section 56(4).

[36] A second aspect of that duty of good faith is “objective fairness”. Wilson J. explains at para. 133 that the standard is not one of the selfless fiduciary. Rather, in negotiating the resolution of matrimonial issues:

The vows of marriage when made are serious ones, with vast social implications. I conclude that the duty of good faith allows a court to impute that the reasonable expectations of the parties are that the contractual terms ending their marital responsibilities must be within the range of objective fairness. Objective fairness must be judged at the time the agreement is reached. It must take into account the facts and circumstances of the case in light of the rights and obligations stipulated in the applicable statutory provisions.

[37] In Sarafinchin v. Sarafinchin, [2000] O.J. No. 2855 (S.C.J.) at para. 14, Sachs J. of this court stated the process of proper disclosure is not a game of "catch me if you can". The recipient of information is not required to be a mind reader when they receive false or incomplete disclosure that is not obviously so. As Peppal J.A. of the Ontario Court of Appeal writing for the court in Virc v. Blair, 2014 ONCA 392 found, the onus is on the person providing false or incomplete disclosure to show that the recipient knew that the disclosure was false. She wrote:

68 It is one thing to disclose assets and liabilities and their values believing the disclosure to be true. It is quite another to deliberately misrepresent the values of assets and liabilities knowing them to be untrue. The law does not entitle a liar to succeed just because the recipient of the falsehoods has not ferreted them out.

69 Furthermore, a clear finding of actual knowledge of the misrepresentation is required. While, as noted in Cheshire and Fifoot, actual knowledge of the falsehood may constitute a defence, a mere suspicion of lack of veracity does not absolve a fraudster of responsibility. In this case, there was insufficient evidence to conclude that the appellant had knowledge of the respondent's misrepresentations.

[Emphasis added]

[38] In Quesnel v. Nadon-Quesnel, [2001] O.J. No. 5476, (S.C.J.), MacKinnon J. of this court was faced with a motion quite similar to the one before this court. The wife had served an offer to settle spousal support issues. Her offer included indefinite monthly support payments plus a requirement that the husband would continue her extended health coverage through his employment. Failing that, he would be deemed to be in contempt. The husband accepted the wife’s offer without telling the wife that he had resigned from his teaching position. That meant that he was incapable of continuing to cover her under his extended health benefits. He also failed to inform her about other aspects of his income and that he had moved to another province.

[39] MacKinnon J. found that the determination of whether to accept a settlement in the face of non-disclosure involved a balancing of two important family law policies. On the one hand, there is the policy of encouraging settlement and allowing the parties to determine their own binding agreement. As MacKinnon J. put it at para 18:

The exchange of offers to settle is to be encouraged. Litigants need to know that the terms of an accepted offer will be binding and enforced by the court. In particular, it ought not to be possible to vitiate an accepted offer by a simple change of mind.

[40] On the other hand, there is an “equally strong policy requiring full and continuing financial disclosure.” As MacKinnon J. pointed out at para. 19:

Family Law Rule 13(15) requires a party to immediately deliver an up-to-date financial statement as soon as he or she discovers that there has been a material change in the information already provided. The Rules provide a mechanism to obtain such disclosure if it is not volunteered, and for serious consequences if an order to disclose is not complied with: see Rule 13(16) and (17).

[41] MacKinnon J. went on to state at para 20 that:

Recent court decisions make it clear that a spouse has an obligation to make ongoing disclosure during settlement negotiations and that failure to do so may result in a court setting aside all or part of a resulting agreement.

[42] At para. 31 of Quesnel, MacKinnon J. found that the factors that a court should consider when attempting to balance between the two family law principles of encouraging settlement (i.e. contractual autonomy) and the requirement of full and continuing financial disclosure include:

• Whether the party seeking to set aside on this basis knew the facts were different than originally stated but decided not to inquire further about details, or neglected to pursue full legal disclosure.
• Whether there was concealment or misrepresentation.
• Whether the nondisclosure was material; how important would the non disclosed information have been to the negotiations.
• Whether the agreed upon terms are fair and reasonable; would they have been different had all the facts been known.
• Whether the request to set aside is made expeditiously.

[43] In deciding not to enforce the agreement before her, MacKinnon J. looked to a number of areas in which the husband before her failed to provide his former spouse with financial information.

[44] In refusing to enforce the settlement, MacKinnon J. did not require a finding that the wife would have withdrawn her offer had she known of the changes to the husband’s financial circumstances. Instead, at para. 26, MacKinnon J. finds it sufficient to say that if the withheld information been known, “…the terms of settlement could have been different.” [Emphasis added] MacKinnon J. explains her rationale by stating:

Without knowing these facts, the court cannot determine whether the terms of the accepted offer constitute a fair and reasonable settlement.

[45] Each party in Quesnel could have done better. The wife could have withdrawn her offer when the husband’s status was unclear. The husband could have made the disclosure. But MacKinnon J. balances the scales against enforcement of the agreement because:

… the policy of encouraging parties to settle their own cases through the exchange of offers and acceptances, needs to be based on the firm foundation of continuing financial disclosure. It is not the policy of the law that parties make offers to settle case in the absence of material financial disclosure.

[46] MacKinnon J.’s point regarding the centrality of disclosure was later emphasised by the Ontario Court of Appeal in Marinangeli v. Marinangeli, [2003] O.J. No. 2819. There, Weiler J.A., writing for the court cited Quesnel at para. 22 to say that a party in a family law proceeding “… had an ongoing duty of disclosure at least until the minutes were signed…” Weiler J.A. spoke of all domestic contracts, such as separation agreements, and implicitly, minutes of settlement, as agreements of the utmost good faith with respect to financial matters, at least until the agreement is signed.

[47] In Rick v. Brandsema, 2009 SCC 10, [2009] S.C.J. No. 10, Abella J. wrote for the Supreme Court of Canada about the interplay between the two factors that MacKinnon J. balanced in Quesnel: the right to contractual autonomy and the duty of full disclosure. Abella J. found that the policy of contractual autonomy is predicated on a symmetry of information, i.e. full disclosure, between the parties. She wrote:

46 This contractual autonomy, however, depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. Informational asymmetry compromises a spouse's ability to do so …

47 In my view, it flows from the observations and principles set out in Miglin that a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances. The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation.

[References omitted]

Application of Legal Principles to the Facts of this Case

[48] In considering the history of the parties’ negotiations in light of the principles and factors set out above, I make the findings below.

Samantha was unaware that the details of Paul’s employment and income had changed

[49] During the argument of this motion, Paul’s counsel asserted that Samantha should have known that Paul would be looking for a job as he had changed jobs a number of times in the past and he was in a precarious position with Diamond. The logical extension of this argument is that she should have withdrawn her offer.

[50] It is true that Samantha heard from Paul about the precariousness of his financial situation. However that was all that she heard from him in regard to his job prospects. Nothing that he advised her would have alerted her that her offer should be withdrawn or that she should pursue further disclosure. The onus was not on her to guess as to his next move, or to paraphrase Sachs J. in Sarafinchin, catch him if she can. She had no reason to suspect that he was misleading her.

There was concealment or misrepresentation

[51] After the COVID-19 outbreak, Paul had advised Samantha that his income of $200,000 per year base salary had been temporarily reduced by 25%. That means that his income was based on an annualized salary of $150,000. Then, on May 12, 2020, he informed her that after eight weeks, the reduction was being continued against his wishes. He offered no end date to the extension, implying that it was indefinite (which he claimed to be the case in his affidavit). He then ended his May 12, 2020 email by stating that his present situation at Diamond “does not leave me much of a future”.

[52] That statement could only be seen to be “full and honest disclosure of all relevant financial information” as per Rick, above, if it is taken in its most literal sense. Paul knew that he had little future at Diamond. But by May 12, 2020, when he emailed an offer to Samantha, he had already spoken to a number of people at Ignite, including its president. He had already been told that he would be offered a salary of $225,000 per year, an increase of $75,000 annually or 50% from what he represented to Samantha he was earning at the time (with his reduced income). Paul had another call with the Ignite president an hour after he made his offer, at which time he was told that the president was optimistic that Ignite’s board would accept his income demands. While he denies it, it has to be clear that by that point he would be leaving Diamond for Ignite, at a substantial salary increase rather than a 25% decrease.

[53] Nothing in Paul’s May 12, 2020 email even hinted at an impending change of employment or income. It spoke only of Paul’s pessimism for his future; of the risk to him of losing his employment and the advantage to Samantha of the certainty of payments. Paul represented to Samantha that his offer placed the financial risk on him while it gave Samantha and children certainty.

[54] In the three days between making his offer and choosing to accept Samantha’s offer, Paul said nothing to her about the facts that:

1. he had actually been offered an annual salary of $280,000 on May 13, 2020.
2. He had been offered an additional title, of “Country Manager”, on May 14, 2020, as part of an offer that he found “enticing”.
3. He had formally resigned from Diamond on May 15, 2020, telling his former employer that he would be accepting a new job. The only new job available to him at that time was the Ignite position. Whether his letter of resignation preceded or followed his acceptance of Samantha’s offer that day, it is clear that he knew that he would accept the Ignite offer when he accepted Samantha’s offer. And that he chose to withhold that information from Samantha.

[55] There clearly was what Abella J., in Rick, called “Informational asymmetry” at play. That asymmetry compromised Samantha’s ability to “come to the negotiating table with the information needed to consider what concessions to accept or offer.” Paul represented to the court that his resignation and his candour with Diamond was a necessary act of good faith, to ensure that he was not in a conflict of interest. But he did not share that candour or good faith with Samantha.

[56] The only credible implication that arises from Paul’s conduct is that when he accepted Samantha’s offer, he knew that he would be accepting a job that would pay him $280,000 per year. That timing fits in perfectly with his current argument that he did not have an obligation to disclose Ignite’s job offer, one that he was clearly going to accept, because he had not yet formally accepted it.

[57] The intentionality of Paul’s non-disclosure is made even more clear in his conduct during the period following his formal acceptance of Samantha’s offer. For the next sixteen days, he continued negotiating with her towards a final resolution of all support issues between them, both spousal and child, as well as costs, all without informing her of his new job and increased income. His soon-to-be former employer, Diamond, knew more about his employment status than Samantha. He presented himself to her as generously offering an additional two months to the term of Samantha’s offer and Samantha as failing to recognize his generosity. He preferred to settle all issues with Samantha ignorant of his true financial situation.

[58] Any narrow claim that Paul can muster that he had no obligation to inform Samantha about his impending job change because he was not certain that he would accept the offer vanished after he actually accepted the offer. But he kept negotiating with Samantha while keeping her in the dark about a set of facts that were essential to her understanding her rights and entitlements.

[59] Thus, it cannot be a coincidence that he first disclosed his new job and increased income to Samantha June 4, 2020, in response to the June 1, 2020 email from Samantha’s lawyer. That email raised the press release announcing Paul’s new position with Ignite and demanded full details of his new income. Only then did Paul actually disclose his new salary and state that he would increase his child support.

[60] Not a peep about increased child support until he knew that Samantha knew about his new job.

[61] One final non-coincidence: Samantha made her offer on October 6, 2019, in anticipation of a trial in the next few weeks. Its quantum, as set out below, was based on the mid-level range for a support payor earning $200,000 per year and a recipient earning almost no income, as she was at the time. Paul had over eight months to accept it or make his counteroffer before he began negotiations with Impact. Yet he only began to negotiate again with Samantha some seven months later, on May 12, 2020. He did so with no trial looming and no discernable inducement to negotiate other than the fact that it was increasingly clear that he would soon be earning substantially more than $200,000 per year.

[62] Paul argues that he was not required to disclose his changed circumstances at any relevant time before accepting Samantha’s offer. He calls for strict reliance on the narrow terms of r. 13, set out above. He says that he breached nothing in r. 13 in failing to disclose information or documentation to Samantha. I disagree. He had obligations under both r. 13 and as part of his common law obligation of good faith to Samantha to disclose his changed employment status and disabuse her from the notions that he would be earning only $150,000 per year in a job with no future.

[63] Dealing first with his FLR disclosure duties, under r. 13(15), Paul had a duty to provide the correct information and documentation to Samantha. That duty, under r. 13(15), arises “as soon as a party discovers” that any document that he had served under r. 13 was incorrect, incomplete or out of date. That party is required to provide a corrected, updated or new document. That was the point made by MacKinnon J. in Quesnel, above.

[64] Here the documents that required correction or which were out of date were his last sworn financial statement and his covering email of May 12, 2020, setting out the extension of his $150,000 per year income from Diamond, and any other documents setting out his income at $150,000 or $200,000 per year. The documents that he needed to produce included (but are not limited to) an updated financial statement, the Ignite job offer and his employment contract.

[65] In interpreting a party’s disclosure obligations under the FLR, it cannot be forgotten that the primary objective of the FLR is to deal with cases justly. Doing so includes, under r. 2(3)(a), ensuring that the procedure is fair to all parties. The parties and their lawyers have a duty to assist the court to promote the primary objective. In light of the central importance of disclosure to family law and the metaphorical illness its absence causes, the FLR’s disclosure rules must not be interpreted overly narrowly, as Paul calls upon the court to do. It cannot be used to play hide and seek with the truth or to take advantage of the ignorance of material facts that the non-disclosing party causes.

[66] Further, disclosure obligations have, as set out above, a common law good faith aspect. They cannot, as Wilson J. put it in Leopold, "play their cards close to the vest". They cannot use selective disclosure and its near-cousin of knowing reliance on outdated representations in order to pull a “fast one” on the other party. That conduct, in a family law context, cannot survive scrutiny under the rubric of good faith.

The nondisclosure was material

[67] In his affidavits and his counsel’s submissions, Paul tries to minimize the materiality of his non-disclosure. But it is hard to do that. The best income information that he had offered Samantha before accepting her offer, and for more than two weeks afterwards as they tried to close an agreement, was that his salary had dropped from $200,000 to $150,000 per year, a 25% decrease.

[68] Paul’s new $280,000 annual salary figure represented an increase of $130,000 per year or 86.67% from the current, $150,000 per year income that he had represented to Samantha during the pandemic and on May 12, 2020. Even if his previous, $200,000 per year income figure is considered, the $80,000 annual salary increase represented a 40% uptick in his income.

[69] As set out above, Samantha’s offer called for fixed-term payments of $3,800 per month, which is the mid-level SSAG support amount for a person earning $200,000 per year. The term of the offer is eight years, one month. The SSAG actually call for an indefinite term of support with the possibility of a review, and a minimum duration of six and a maximum of 12 years. It should be noted that I have not been provided with details of Paul’s interim support payments so I cannot say how they would affect the SSAG duration spectrum.

[70] Considering the global quantum that would be paid by Paul to Samantha under her offer, as the Ontario Court of Appeal did in Fisher v. Fisher, 2008 ONCA 11, it would total $368,600. That assumes that all payments are made.

[71] On the other hand, if the term of the offer continues but the payor income is changed to $280,000 per year, the mid-level SSAG support amount is $5,856 per month. Over the eight-year, one month term of the October 6, 2019 offer, the global payments would total $568,032. The difference between the two amounts is $199,432 or 54%.

[72] It is hard to argue in the circumstances that $199,432 or 54% is anything but material. I find that the difference is quite material. Even the low-end support would be $5,165 per month or a total of $501,005. The difference would be $132,405 or 36%.

[73] Paul makes two arguments that must be considered at this point. First he asserts that Samantha may not be entitled to share in his post-separation income increase. Theirs was not a long-term marriage. He argues that Samantha did not contribute to that income increase. Second, he argues that Samantha recently completed teacher’s college and will presumably obtain a high paying job.

[74] With regard to a post-separation increase in a payor’s income, I wrote the following in Cameron v. Cameron, 2018 ONSC 2456:

66 Professors Rogerson and Thompson, writing in the SSAG, tie the claim to post-separation increases in income to "some rough notion of causation". They write at para. 14.3:

Some rough notion of causation is applied to post-separation income increases for the payor, in determining whether the income increase should be reflected in increased spousal support and, if it should, by how much. It all depends on the length of the marriage, the roles adopted during the marriage, the time elapsed between the date of separation and the subsequent income increase, and the reason for the income increase (new job vs. promotion with same employer, or career continuation vs. new venture).

67 In the RUG [Revised Users Guide to the SSAG], Professors Rogerson and Thompson make clear that "some rough notion of causation" is not to be taken as requiring a clear line of causation between the relationship and the income increase. They state:

It would be better to describe it as a "link" or "connection", between the marriage and the increase after separation. That has certainly been the approach of most courts, especially those in B.C. and Ontario.

68 Professors Rogerson and Thompson add that, strictly speaking, a finding of compensatory entitlement is not a prerequisite to a spouse sharing in post-separation income increases, particularly in long-term marriages. They say:

The basis of entitlement has a significant impact upon the degree of sharing of increases, with compensatory claims more likely to result in sharing than non-compensatory claims, but not exclusively so. There can be sharing --partial, or even full--in non-compensatory cases too, especially after long marriages.

69 The authors add that practically speaking, cases regarding post-separation income increases are "complex ... involving a mix of facts and legal factors, with a strong discretionary element to the final judgment."

[75] Here, Paul’s counsel concedes that Samantha, the children’s primary caregiver, who was out of the work force for some time, is entitled to support on a compensatory basis. Because of the parties’ economic interdependence, she also has a non-compensatory claim. The parties had a 12 or 14-year marriage, which is in the SSAG middle-term range. While Samantha was caring for the children, Paul was able to earn a six-figure salary. Inasmuch as Samantha continues to primarily care for the children, the compensatory aspect of her support claim continues.

[76] Within the limited context of this motion, I cannot definitely speak about the exact parameters of Samantha’s claim to share in Paul’s post-separation income increase. But I can say that there is good reason to believe that she will be entitled to share in some if not all of that increase. At the very least, the issue is a highly triable one.

[77] Paul also argues that Samantha’s anticipated earnings as a teacher will decrease her entitlement to support. That may be the case but I do not have any evidence before me about the teaching job market at this time, particularly during a pandemic. It is notoriously difficult to obtain full time teaching employment at this time. I also have to be aware that, as the primary care giver of children aged 10 and 11 ½, during these uncertain times, Samantha’s requirement to care for the children during the pandemic may affect her ability to even carry on employment before a vaccine or herd immunity is developed.

[78] In short, the disclosure is material enough that it would likely have affected the negotiations between the parties and likely the ultimate result in any trial between the parties. Samantha did not have the chance to withdraw her offer because Paul had a monopoly on information about his income increase. He took advantage of that disparity to settle on terms that would call for him to pay a spousal support amount that is less than he is likely to pay when all of the facts are known.

The agreed upon terms are not fair in the circumstances

[79] Paul argues that in any event, the terms agreed upon are more than fair in the circumstances. Samantha has a fixed and fairly certain amount of income until both children are adults or close to adulthood. Even with his new job, there are no certainties. The settlement is upon terms that Samantha was willing to accept. In fact, they are the terms of her own offer. At the time that the offer was made, she and the children would have had 54% of both parties’ net disposable income (“NDI”) even though she was not working outside the home. All of this was an amount that she was willing to accept.

[80] Paul essentially argues that Samantha will still receive a considerable amount of support, $3,800, each month. That is true. But the amount that she receives must be seen within the context of her entitlement and the relative standards of living of the family as a whole.

[81] Writing for the Ontario Court of Appeal in Fisher, above, Lang J.A. suggested at para. 101-103, the SSAG amount is the “starting point” for the consideration of the appropriate quantum of spousal support. It stands in the place of a “significant legal authority” that the court must consider and explicitly distinguish if it chooses to award an amount outside its suggested range.

[82] There is good reason to believe that Samantha is entitled to up to some $2,000 per month more in monthly spousal support than the amount contained in her offer. Samantha was intentionally deprived of the information required to determine whether she should withdraw her offer or continue to allow it to remain open. Paul took advantage of that information deprivation to settle on terms that were likely more advantageous to him and less advantageous to Samantha than they would be at a trial.

[83] Looking to the SSAG mid-range for a payor earning $280,000 per year, if he were required to pay only $3,800 per month in spousal support, Paul alone would enjoy 50.6% of the parties’ joint net disposable income (“NDI”). Samantha and the parties’ three children would together share 49.4% of the parties’ NDI. While the result at trial cannot be certain, the amounts set out above, are not likely to be seen as equitable or fair in the circumstances.

[84] I note that in Quesnel, MacKinnon J. did not feel that she had to set out exactly what the proper amount of support would be if she set aside the agreement. It was sufficient to say that with the information before her, the court could not “…determine whether the terms of the accepted offer constitute a fair and reasonable settlement.”

[85] Paul points out that whether or not the spousal support agreement is enforced, he is now paying child support at an increased level. He is paying $941 per month extra in table child support, with his obligation increasing from $2,696/mo. to $3,637/mo.

[86] While Samantha and the parties’ children would be able to more than survive on the $3,800 per month plus proper table support that Paul is paying her if the agreement is enforced, that is not the test for enforcement of the agreement. If it is enforced, he will be able to pay her up to $2,000 per month less that the mid-range support for his income. The difference over the lifetime of the agreement would be up to almost $200,000. That figure ignores the possibility of his obtaining a bonus, something that he did not receive from Diamond (and which he claims that he will not receive from Ignite).

[87] In sum, and in the circumstances the $3,800 per month limited term spousal support amount is unfair and unreasonable to Samantha because she is likely entitled to a substantially great amount of support and would be deprived of the right to seek it if the agreement were enforced.

The request to set aside is made expeditiously

[88] Based on the chronology set out above, it is clear that Samantha made the request expeditiously. Paul has not argued to the contrary.

Prejudice

[89] Paul argues that he would be prejudiced if the agreement were set aside. He says that he felt that he could plan his financial future once he accepted Samantha’s offer. He implies that he may not have accepted the new job offer if he could not have accepted Samantha’s offer. I cannot give credit to either argument.

[90] As set out more than once above, Paul is not entitled to take advantage of an agreement that was not negotiated in good faith and based on an intentional withholding of vital information. It is also not credible that he would turn down a job offer that would almost double his salary just because he would have to increase his spousal support payments. If he did, he would be intentionally underemployed under s. 19(1)(a) of the Child Support Guidelines.

[91] The only prejudice that Paul would suffer would be the loss of an unfair agreement and the fact that he will be forced to participate in the same trial that he would have litigated had he not accepted the offer. Unfortunately, both parties will have to prepare and participate in that proceeding. It is to be hoped that with an even informational playing field, they will now be able to sort out their spousal support issues.

Conclusion Regarding Non-Disclosure

[92] For the reasons set out above, I find that Paul’s non-disclosure of facts about his income and job prospects was deliberate and material. He withheld information that, if known, would likely have resulted in a different result that the terms of the offer that he accepted. The end result was an unfair agreement, that should not and will not be enforced.

Issue of Costs of Accepted Offer is Moot

[93] In light of my finding regarding the enforceability of the agreement regarding spousal support, the issue of costs is moot.

Conclusion

[94] Accordingly, I dismiss Paul’s motion for judgment. Instead, this matter shall proceed to trial at the next available sittings. The parties shall attend assignment court on September 15, 2020 at 10:00 a.m.

[95] The parties shall arrange a further trial management conference on a date convenient to themselves and the court.

Costs

[96] I commend the parties to attempt to resolve the costs of this motion on their own. Failing that, the Applicant, as the successful party, may submit a three-page, double spaced, 1” margin costs submission, along with a bill of costs/costs outline, dockets if so chosen, and any authorities, all within 14 days. The Respondent may do the same within a further 14 days. No reply or oral submissions unless I so request. If I do not hear from either party within 14 days, I will assume that the cost issue has been resolved.

[97] In the circumstances of the COVID-19 emergency, this endorsement is deemed to be an Order of the Court that is operative and enforceable from the time of its release without any need for a signed or entered, formal, typed Order.

“Marvin Kurz J.” Electronic signature of Justice Marvin Kurz, Original will be placed in court file Dated: August 18, 2020